The Foundation Co-Hosts Dialogue to Address Bangladesh’s External Debt Scenario

On April 4, the Foundation co-hosted a dialogue with the Centre for Policy Dialogue (CPD), a partner of the Foundation’s South Asia Governance Program, on Bangladesh’s external debt servicing scenario. In December 2023, the country’s external debt crossed the $100 billion mark, surging 51% in just three years. The dialogue’s speakers focused on concerns related to Bangladesh’s future debt service capacity, the sustainability of its debt borrowings, and the precautionary steps it can take to prevent falling into a debt trap.

Several key individuals were in attendance, including Mashiur Rahman, the economic advisor to the Prime Minister, who was the chief guest. Salehuddin Ahmed, former governor of Bangladesh Bank, and Kamran T. Rahman, president of the Metropolitan Chamber of Commerce and Industry, offered comments as distinguished panelists.

Mustafizur Rahman, a distinguished Fellow at CPD, delivered the keynote presentation and cautioned about the negative implications of borrowing to repay external borrowings. A recent study demonstrates that, between fiscal year 2011 and 2023, total external outstanding public and publicly guaranteed (PPG) debt tripled, and debt servicing increased by 2.6 times, while the revenue burden continues to increase at an alarming pace. In fiscal year 2022 to 2023, PPG debt grew to 200% of revenue earnings, suggesting that Bangladesh’s debt-carrying capacity could fall into the ‘weak’ category. In June 2023, external debt interest grew by 99%, and the principal grew by 32% compared to the previous year.

The dialogue culminated with CPD offering a series of suggestions for next steps, including giving high priority to enhancing domestic resource mobilization through taxation, making accurate estimates of debt service obligations, strengthening good governance in the implementation of public infrastructure projects, diversifying sources for development finance, and strengthening loan negotiation capacity.